Israel’s Teva Bids $40 Billion For US Generic-Drug Rival

In what could become Israel’s biggest cross-border M&A deal ever, Teva Pharmaceutical Industries made an unsolicited $40 billion offer to acquire Mylan, a Pennsylvania-based drugmaker registered in the Netherlands with operational headquarters in the UK.

The deal is contingent on Mylan’s dropping its own $29 billion bid for Perrigo, an Irish manufacturer of cold and allergy remedies.

The proposed merger of Teva, the world’s largest generic-drug company, with Mylan, the second-largest, is expected to attract close scrutiny from antitrust regulators. Mylan is resisting Teva’s offer, and Robert Coury, Mylan’s executive chairman, says it is unlikely the deal will obtain the necessary antitrust approvals.

Fitch Ratings placed Teva and its subsidiaries on negative rating watch following the cash-and-stock bid, which it said would require significant new borrowings. It noted, however, that the addition of Mylan would boost Teva’s presence in important growth markets of India and the Asia-Pacific region. Completion of the Mylan deal as proposed, however, would not be supportive of Teva’s BBB+ rating, Fitch says.

The rating agency is bullish on the generic drug industry. It cites aging populations and growing acceptance of generic drug products in developed markets.